Russia Watch: Against Chubais

...This Cheka, of course, has not set up torture cellars or ordered public hangings of tax cheats...

...At the beginning of October, Chubais managed to get Yeltsin to sign an executive order which, according to Nezavisimaya Gazeta, has widened the powers of the presidential administration beyond those stipulated by Russia's constitution...

...After Alexander Lebed's ouster from the Yeltsin government, the Times described Chubais JONAS BERNSTEIN reports regularly from Moscow...

...That shouldn't be too much of an impediment...

...RUSSIA WATCH by Jonas Bernstein IIIWOIImllllii Against Chubais In October, outgoing U.S...

...Everything is getting endlessly better, even though in October presidential chief of staff Anatoly Chubais asserted, "In order for there to be a democracy in society, there must be a dictatorship within the government...

...Illarionov called this the biggest obstacle to Russia's reforms...

...He is apparently approaching his goal...

...Chubais sees his task as "the consolidation of power" on behalf of the regime, and reasserting control over the airwaves has been an important step in that process...

...One of Chubais's goals as head of the presidential administration is to bring Russia's eighty-nine regions under tighter Kremlin control...

...This is probably an overstatement, but Chubais and Prime Minister Viktor Chernomyrdin are reportedly attempting (whether This presidential chief of staff is no Leon Panetta...

...But whether it goes the route of pre-reform Latin America, or finds surer success modeling its Asian neighbors, democratic capitalism as understood in the West is just not in the cards...

...If the Communists do join the establishment, one could imagine the opposition vacuum being filled by the deposed General Lebed...

...The Cheka tax commission is little more than an attempt to use police methods to collect revenue—not exactly a new idea in Russia—but it is an excellent weapon to use against political rivals...

...as "plotting how to carry out the next stage of Russia's democratic revolution...

...The acronym for this new commission is "VChKa" — that is, Cheka...

...The campaign artfully combined enormous pork-barrel promises—increased social spending for the masses, huge tax breaks for big businesses—and a media blitzkrieg replete with hagiographic "news" coverage and paid political advertising...

...of4 The American Spectator • December 1996 69...

...The list is most interesting for its omissions— Gazprom, Russia's natural gas monopoly, and the giant Norilsk Nickel metals producer...

...Yet Chubais—one of the most hated men in Russian public life—is widely understood to have initiated the defamation campaign against Lebed which preceded the ouster...

...It is perhaps no accident that two large enterprises at the top of the blacklist—an oil company and an auto maker—are actually minor offenders, but are located in the fiercely autonomous region of Tatarstan...

...He organized the president's successful re-election campaign last summer, transforming Yeltsin's single-digit opinion-poll numbers into an electoral victory over the Communists...

...When Yeltsin announced the new tax commission, he said he understood that taxes in Russia are too high, but said they would be lowered only after the arrears problem is settled...

...The two reportedly have complete control over who sees the president, what information he gets, and even, according to one newspaper account, which telephone calls get through...

...Grigory Yavlinsky, head of the liberal Yabloko faction, aptly described the struggle as "a battle for power, for the ability to control budget funds," operating according to "mafia rules...

...he has been around power in Russia for a very long time, and has allies throughout the state apparatus...

...it is more like the Thermidor of democratic revolution —the emergence of a state capitalist oligarchy...

...There's even an outside chance that what emerges is an economic system resembling the Asian model, with high growth rates based on natural-resource exports and a close government-business "partnership...

...68 December 199 6 • The American Spectator A together or in competition is unclear) to tighten control over the security services...

...Uneximbank president Vladimir Potanin was even given Chubais' old job—first deputy premier in charge of the economy—this summer...

...It has, however, drawn up a black list of the worst offenders and threatened them with bankruptcy proceedings...

...Anybody who remembers the Kremlinologists of twenty years ago playing the parlor game of dividing the Politburo into "good guys" and "bad guys" will not be surprised that the Clinton administration—or its official mouthpieces like the New York Times—is adopting a similarly reductive view of today's Russia...

...They are among the worst violators, but Chemomyrdin once headed (and remains close to) Gazprom, and Norilsk wasacquired last year by Uneximbank, a bank close to Chubais, during a series of fixed privatization auctions...

...Chubais obviously understands that cutting taxes would ultimately yield more revenues, but Russian reformers in power tend to behave like bureaucrats anywhere, extending their power as far as it will go...

...Pickering surely knows this, but the Bill Clinton-Strobe Talbott vision of Russia brooks no criticism...

...ree-market economist Andrei Illarionov has described what is taking place in Russia as "the privatization of the state...which means that the state apparatus is being used to further the private interests of specific private groups...

...Such a rumor, however, understates Chemomyrdin's political muscle...

...Still, the New York Times declared that Chubais was fighting "an uphill struggle to bring order to the Kremlin...

...Such a scenario makes Chubais, with his Ivy League appearance and English-language skills, the embodiment of the "liberal" wing—a kind of Russian Carlos Salinas...

...In addition to his other duties, Chubais is also technically Chernomyrdin's deputy on a "temporary emergency commission" recently formed to deal with Russia's serious tax-evasion problem...

...The ex-head of Boris Yeltsin's security service, Korzhakov is a sinister figure himself, who boasted that he had kompromat— compromising materials, generally involving corruption—on top Russian officials, including Chubais...

...He also gushed about Moscow's plethora of "mobile phones, new Western cars and dozens of pricey restaurants and clubs," and predicted that "doing business in Russia will become more structured, more predictable and less risky...

...Although Chubais and his allies in big business may be tempted to look at their experience in last summer's electoral campaign and conclude that a monopoly on money and media makes anything feasible, Chubais is unlikely ever to become president...

...But Russia's main channels, including theprivate NTV, are controlled by financiers who belong to the Chubais camp...

...The Communists are increasingly giving indications that they would like to move from implacable to loyal opposition, becoming in effect the left wing of a new Latin American—style, corporatist political system...

...An economist and the architect of Russian privatization, he has become known more for administiative skills that many say border on genius...

...In fact, Chubais was author of the plan, and is the commission's de facto head...

...Some columnists here wryly suggested that, for the sake of tradition, the new Cheka might subsequently be renamed the "National Commission for Internal Debt"—in Russian, NKVD —and then changed again to the "Main Payments Directorate," or GPU...

...It started with attacks on Alexander Korzhakov, a Lebed ally, whom Chubais pushed out of the Kremlin last June...

...Yeltsin, of course, has a television at Barvikha, the government health sanitarium where he is awaiting heart surgery...

...He was effusive about Russia's transformation, and declared that within three years "Americans will be able to travel to Sochi as easily and as regularly as they now travel to Chicago and Cleveland...

...It is widely rumored that Prime Minister Chernomyrdin would be forced to fall on his sword for the tax arrears problem, instead, and Chubais installed in his place...

...NTV, which just a little over a year ago was lambasting the regime for the war in Chechnya, has begun to resemble Soviet state television in its loyalty to the throne...

...The presidential chief of staff has forged a close relationship with Tatyana Dyachenko, Yeltsin's younger daughter...

...The body combines the powers of the economic, finance, and tax agencies with those of the internal and external security services...

...One of Chubais's allies, Deputy Economics Minister Sergei Vasiliev, was very blunt about the purpose of the new Cheka: "It is necessary to introduce an economic dictatorship that would exercise control over the work of banks, payment transfers and tax collection," he told Kommersant Daily...

...Chubais has received praise for his plan to re-assert Kremlin control over the regions from Aleksei Podberyozkin, top ideological adviser to Communist leader Gennady Zyuganov...

...Moscow has indeed become a more comfortable place for wealthy New Russians with "mobile phones" and "new Western cars," but they are not the kind of people who make business "less risky...

...Three days before the appointment, Norilsk Nickel received a $1 billion tax break...

...Thus supply-side theory takes second chair to political concerns...

...With Lebed now out of the way, Chubais has brought all of Russia's "power ministries"—the armed forces, the interior ministry, internal and external intelligence, and the border guards—effectively under his control, according to some press reports...

...As Yeltsin's health has worsened, however, Chubais's "consolidation of power" has started looking distinctly like a personal power grab...

...By the end of the mud-slinging contest—which involved allegations of extortion, planned contract killings, embezzlement of state funds, and coup preparations—both sides had proved themselves able purveyors of KGB-style black propaganda...

...The campaign reportedly dwarfed official spending limits...

...The Indonesians don't have a democracy, after all—and the Clinton administration has found plenty of reasons to do business with them anyway...

...Taken together, taxes in Russia are virtually confiscatory, like something out of Jude Wanniski's worst nightmare...